Who will be no 2? The big war in 2-wheeler industry

So Honda wants to be the leader of India’s two-wheeler industry by 2016. But I think there is a bigger and more interesting battle to watch out for. Who will be no 2? Bajaj Auto or Hero MotoCorp?

Before talking about the second slot, my quick thoughts on the top slot. Most industry experts – analysts, consultants and industry executives – seem to give Honda 5-10 years to win the Indian market and become the no 1 player. Yes, the present gap between Honda and Hero MotoCorp is big – with Hero occupying 46% market share and Honda through HMSI cornering just under 20% at no 2.

I understand the basis of this confidence in Honda. It is the largest two-wheeler MNC in the world (17 million vehicle sales annually as against Hero’s 6 million plus). It is the leader in virtually every market (Indonesia 50% market share and Brazil 80%) except China which has a very fragmented two-wheeler industry. Honda’s global reign, its wide product portfolio and a well-oiled R&D machinery is likely to aid its rise to the top. Here’s my story in ET Magazine that throws some light on Honda plans to get there.

So if Honda will be no 1, does it automatically mean Hero MotoCorp will be no 2 in India? Let me ask a different but a more interesting question. Today, globally Honda is no 1, Hero is no 2, Yamaha is no 3 and Bajaj is no 4. Will this pecking order change?

Lets tackle Yamaha – the third largest player – first. Yamaha has not done well in emerging markets like India and it is likely to find it difficult to efficiently deal with price-product equations in developing markets like Africa and Latin America, the way Indian companies like Bajaj may be able to.

Looking at the two Indian biggies, Hero MotoCorp and Bajaj, here are four important reasons why I would bet on Bajaj dislodging Hero from the second slot in the global sweepstakes – in the next 5-10 years. One, Bajaj is extremely focused and knows exactly what it wants to be and what it does not want to be. Focused on motorcycles, the more profitable part of the two-wheeler pie, it has built its business and positioning well. Think of the Apple vs Nokia battle in the cellphone industry. Nokia till five years back was a leader by a huge margin. And Apple a relatively small player at the high end. Even in 2012, Nokia sold 3,34,000 handsets and Apple sold 1,30,000. But as far as profitshare is concerned, Apple is far ahead. While Bajaj may not have the ‘Apple’ glow, the fact that it is so focused on profitshare than marketshare gives it a stronger balance sheet to plan ahead.

Two, Bajaj has a headstart in exports. At 1 million plus already (Hero’s is under 1,75,000 units) it is far ahead. And its MD would ideally want its exports to be double that of India sales. So Bajaj is looking at a far bigger playfield – the world – to sell its bikes. Hero sees its exports to touch 1 million by 2016-17. In fact I see Bajaj taking the global route to no 2 slot, if it ever takes that.

Three, Bajaj’s decent job in developing its R&D, building its brand and stitching global partnerships will give it an edge as it grows its business in future.

But perhaps the biggest differentiating edge that Bajaj can boast of today is having a leader in Rajiv Bajaj who has a clear vision, has a strategy to get there and is doing everything that he possibly can to get his company there.

Who will be global no 2? Between Hero and Bajaj, I am betting on Bajaj.